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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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ALTAIR INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
Province of
Ontario,
Canada 1-12497 None
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(State or other (Commission File No.) (IRS Employer
jurisdiction Identification No.)
of incorporation)
1725 Sheridan Avenue, Suite 140
Cody, Wyoming 82414
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (307) 587B8245
[ ] Securities registered pursuant to Section 12(b) of the Act: None
[X] Securities registered pursuant to Section 12(g) of the Act:
Common Shares, no par value Nasdaq National Market
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(Title of Class) (Name of each exchange on which registered)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Shares held by non-affiliates
of the Registrant on March 15, 2000, based upon the closing sale price of the
Common Shares on the NASDAQ Stock Market of $5.813 per share on March 15, 2000,
was approximately $77,185,000. Common Shares held by each officer and director
and by each other person who may be deemed to be an affiliate of the Registrant
have been excluded. As of March 15, 2000 the Registrant had 15,837,882 Common
Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on June 1, 2000 are incorporated by reference in Part
III of this Report.
INDEX TO FORM 10-K
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PART I.......................................................................................................4
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Exchange Rate Information.................................................................................4
Item 1: Business.........................................................................................4
General...................................................................................................4
Titanium Pigment Processing Technology....................................................................6
The Jig...................................................................................................9
Tennessee Mineral Property...............................................................................14
Plan of Operation--General...............................................................................16
Subsidiaries.............................................................................................17
Government Regulation and Environmental Concerns.........................................................18
Employees................................................................................................18
Where You Can Find More Information......................................................................19
Glossary of Terms........................................................................................19
Forward-looking Statements...............................................................................21
Factors that May Affect Future Results...................................................................21
We Have Not Generated Any Operating Revenues or Profits...............................................21
We May Continue to Operate at a Net Loss..............................................................21
We May Not be Able to Raise Sufficient Capital to Meet Present and Future Obligations.................22
Our Operations Are And Will Be Subject to Extensive Government Regulation.............................23
Certain of Our Experts and Directors Reside in Canada And May Be Able to Avoid Civil Liability........23
We are Dependent on Key Personnel.....................................................................23
We May Fail to Identify or Be Unable to Consummate Important Strategic Transactions...................24
We May Issue Substantial Amounts of Additional Shares Without Stockholder Approval....................24
The Market Price of Our Common Stock Is Extremely Volatile............................................24
Future Sales of Currently Restricted Securities May Affect the Market Price of Our Common Stock.......25
We Have Never Declared A Dividend And May Not For the Foreseeable Future..............................25
Our Series 12 Jig Is Too Small For Most Commercial Uses...............................................25
Testing Is Incomplete on Our Series 30 Jig............................................................26
Performance Of The Jig In A Commercial Setting May Not Match Test Results.............................26
The Jig Faces Competition From Alternative Technologies...............................................26
The Jig Faces Competition From Other Jig-like Products................................................27
The Market for Commodities Produced Using the Jig May Collapse........................................27
We Are Dependent Upon Others To Manufacture The Jig...................................................27
Certain Key Patents For The Centrifugal Jig Have Expired Or Will Expire In The Near Future............28
We Have Not Completed Testing The Feasibility of Mining The Tennessee Mineral Property................28
We May Be Unable to Obtain Necessary Environmental Permits for the Tennessee Mineral Property.........29
Any Operations On the Tennessee Mineral Property May Lead to Environmental Liability..................29
We Have Not Yet Confirmed the Viability and Effectiveness of the Processing Technology
and Processing Assets...............................................................................30
Nanoparticles Produced Using the Processing Technology May Be, or Be Perceived As, Substandard........30
The Current Market For TiO2 Nanoparticles Is Limited..................................................31
Our Cost of Production May Exceed Estimates...........................................................31
Pending Patent Applications May Be Denied Or Provide Inadequate Protection............................31
Use of the Processing Technology May Lead to Substantial Environmental Liability......................32
2
Item 2. Properties......................................................................................32
Item 3. Legal Proceedings...............................................................................33
Item 4. Submission of Matters to a Vote of Security Holders.............................................33
PART II.....................................................................................................33
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Item 5. Market for the Common Stock and Related Shareholder Matters.....................................33
Market Price.............................................................................................33
Outstanding Shares and Number of Shareholders............................................................34
Dividends................................................................................................34
Transfer Agent and Registrar.............................................................................34
Canadian Taxation Considerations.........................................................................34
Item 6. Selected Financial Data.........................................................................35
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...........36
Overview.................................................................................................36
Results of Operations....................................................................................37
Liquidity and Capital Resources..........................................................................38
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...................................38
Item 8. Financial Statements and Supplementary Data.....................................................39
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............39
PART III....................................................................................................39
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Item 10. Directors and Executive Officers of the Registrant...........................................39
Item 11. Executive Compensation.......................................................................39
Item 12. Security Ownership of Certain Beneficial Owners and Management...............................39
Item 13. Certain Relationships and Related Transactions...............................................39
PART IV.....................................................................................................39
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..............................39
3
PART I
This Annual Report on Form 10-K for the year ended December 31, 1999 (this "Form
10-K") contains "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Exchange Act of 1934, as amended (the "Exchange Act"), that involve
risks and uncertainties. Purchasers of any of the common shares, no par value
(the "Common Stock") of Altair International Inc. ("Altair" or the "Company")
are cautioned that the Company's actual results will differ (and may differ
significantly) from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include those factors
discussed herein under "Factors That May Affect Future Results" and elsewhere in
this Form 10-K generally. The reader is also encouraged to review other filings
made by the Company with the Securities and Exchange Commission (the
"Commission") describing other factors that may affect future results of the
Company.
Exchange Rate Information
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The following exchange rates represent the noon buying rate in New York
City for cable transfers in Canadian dollars, as certified for customs purposes
by the Federal Reserve Bank of New York. The following table sets forth, for
each of the years indicated, the period end exchange rate, the average exchange
rate (i.e., the average of the exchange rates on the last day of each month
during the period), and the high and low exchange rates of the U.S. dollar in
exchange for the Canadian dollar for the years indicated below, based on the
noon buying rates.
Year Ended December 31,
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1999 1998 1997 1996 1995
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(Canadian dollar per US dollar)
High 1.5302 1.5770 1.4398 1.3822 1.4238
Low 1.4440 1.4075 1.3392 1.3310 1.3285
Average 1.4827 1.4894 1.3849 1.3638 1.3725
Year End 1.4440 1.5375 1.4288 1.3697 1.3655
Item 1: Business.
General
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A glossary of technical terms used in the following description of the
Company's business is set forth at the conclusion of this Item 1. Unless the
context requires otherwise, all references to "Altair," "we," "Altair
International Inc.," or the "Company" in this Form 10-K refer to Altair
International Inc. and each of its subsidiaries.
Altair International Inc. was incorporated under the laws of the
Province of Ontario, Canada in April 1973 for the purpose of acquiring and
exploring mineral properties. Since 1994, the Company has also devoted
substantial resources to the development and testing of mineral processing
equipment for use in the recovery of fine, heavy mineral particles.
4
During 1996, Altair acquired the rights to the Campbell Centrifugal
Jig, since modified and renamed the Altair Centrifugal Jig (the "Jig"), through
a merger involving the Company, Fine Gold Recovery Systems, Inc., a wholly owned
subsidiary of the Company ("Fine Gold"), and Trans Mar, Inc., a Washington
corporation ("TMI"). The Jig is a machine that uses a rotating circular screen
and pulsating water to separate valueless mineral particles from more valuable
mineral particles based on the differences in their specific gravity. In tests,
the Jig has proven capable of segregating and recovering extremely fine mineral
particles which are not economically recoverable using existing conventional
techniques. Altair is presently testing and customizing the Jig for use in the
recovery of heavy minerals such as titanium and zircon. Management believes that
the Jig could also be used to recover other minerals such as gold and for
environmental remediation. See "--Jig Technology and Proprietary Rights."
Altair has also leased, and is exploring, approximately 14,000 acres of
land near Camden, Tennessee (the "Tennessee Mineral Property") to determine
whether it would be amenable to large-scale mining for titanium and zircon using
the Jig or other equipment. Preliminary reports suggest that the Tennessee
Mineral Property contains significant amounts of valuable heavy minerals,
including titanium and zircon, and is suitable for a large-scale sand mining
operation with a multi-decade life. See "--Tennessee Mineral Property."
In October 1998, Altair acquired an option to enter into a mineral
processing lease on a heavy mineral sand stockpile located near Ione, California
(the "California Mineral Property"). Although the California Mineral Property
was of limited size, existing data suggested that the stockpiled materials
graded between 14% and 31% heavy minerals (compared to 2% heavy minerals content
in some primary mine locations). During 1999, the Company completed sampling and
analysis of the stockpile and determined that, due principally to high
concentrations of contaminants, the property is not economically feasible to
develop. As a result, Altair allowed the option to expire and wrote off
approximately $94,000 of costs associated with the project.
In November 1999, Altair acquired all patents and technology related to
a hydrometallurgical process developed by BHP Minerals International, Inc.
("BHP") primarily for the production of titanium dioxide products from titanium
bearing ores or concentrates (the "Processing Technology"), all tangible
equipment and other assets used by BHP to develop and implement the Processing
Technology and the use for one year (for no fee) of the services of the 18 BHP
personnel presently developing the Processing Technology. See "Titanium Pigment
Processing Technology." Although Altair intends to continue to invest in the
exploration and testing of mineral properties and mineral processing equipment,
it expects that a majority of its resources during calendar year 2000 will be
focused on the development and exploitation of the Processing Technology.
From a financial and accounting standpoint, the Company is a
development stage firm and has been since its inception. To date, the Company
has derived no revenues from product sales or otherwise and has experienced an
operating loss in every year of operation. In the fiscal year ended December 31,
1999, the Company experienced operating losses of $2,291,850.
Throughout this Form 10-K, the Company is sometimes referred to or
defined as a "development stage" company or firm. Such references are for
financial and accounting purposes only and are intended to signify that the
Company is devoting substantially all of its efforts to establishing a new
business, and planned principal operations have commenced, but there has been no
significant revenue therefrom. References to the Company as a development stage
company are not intended to imply that exploration activities with respect to
the Tennessee Mineral Property or any other mineral deposits have disclosed a
commercially viable reserve. For purposes of Regulation S-K, Item 802, Guide 7
promulgated under the Exchange Act of 1934, the Company should be considered an
"exploration stage" company.
5
Titanium Pigment Processing Technology
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Acquisition of the Processing Technology. On November 15, 1999, the
Company entered into an Asset Purchase and Sale Agreement (the "Asset Purchase
Agreement") with BHP pursuant to which the Company purchased all patents and
technology related to a hydrometallurgical process developed by BHP primarily
for the production of titanium dioxide ("TiO2") products from titanium bearing
ores or concentrates (i.e., the "Processing Technology"), all tangible equipment
and other assets used by BHP to develop and implement the Processing Technology
(the "Processing Assets") and the use for one year (for no fee) of the services
of the BHP personnel presently developing the Processing Technology.
The purchase price for the Processing Technology and Processing Assets
is 15,000,000 Australian Dollars (AUD$) and was arrived at after extensive
arms-length negotiation between Altair and BHP. (The noon buying rate in New
York City for an Australian Dollar on March 15, 2000, as reported by the Federal
Reserve Bank of New York for customs purposes, was $.6125 United States
Dollars.) Altair initially agreed to pay the purchase price in four equal
installments of AUD$3,750,000, the first of which was made at closing. The
second payment, which was originally due February 15, 2000, has been
rescheduled, with interest at 15% per annum, until May 15, 2000. The remaining
two payments are due and payable on May 15, 2000 and August 15, 2000. The
Company funded its first installment of the purchase price using existing cash.
It intends to fund future installments primarily through the offer and sale of
Common Stock, warrants to purchase Common Stock, and various other debt or
equity securities. The Company may also use revenues, if any, generated from the
sale of mineral products produced using the Processing Technology to fund part
of the May 15, 2000 and August 15, 2000 installments. If the Company fails to
pay any of the remaining three installments to the purchase price, the Asset
Purchase Agreement provides that it will forfeit to BHP, without a right to
reimbursement of any amount of the purchase price paid to date, all right, title
and interest in the Processing Technology and Processing Assets.
The Asset Purchase Agreement also requires the Company to pay to BHP,
until the earlier of the fifteenth anniversary of November 15, 1999 or the date
it has paid an aggregate royalty of AUD$105,000,000, a quarterly royalty equal
to:
o 1.5% of the international market price of all uncoated TiO2 pigment
produced and sold as a result of the use of the Processing Technology
by the Company or a transferee at the Company's mineral properties in
Tennessee;
o 1.5% of the international market price of all uncoated TiO2 pigment
produced and sold as a result of the use of the Processing Technology
by BHP or any affiliate of BHP at a specified heavy mineral sand
operation located near Auckland, New Zealand;
o 3% of the international market price of all uncoated TiO2 pigment
produced and sold as a result of the use of the Processing Technology
by the Company or a transferee of the Company at any location other
than its Tennessee Mineral Property or the Auckland, New Zealand heavy
mineral sand operation; and
o 3% of the sales proceeds (F.O.B. the Company's facility, reduced by the
amount of product returns) received by the Company or a transferee of
the Company from the sale of any products other than TiO2 pigment
produced through its use of the Processing Technology.
6
In addition, in connection with the Asset Purchase Agreement, the Company and
BHP entered into a Lease dated November 15, 1999, pursuant to which the Company
leases approximately 20,000 square feet of laboratory and testing space at BHP's
testing facility in Reno, Nevada for a monthly rent of $15,000. The initial term
of the Lease expires on December 31, 2000, subject to automatic renewal for
six-month periods at inflation-adjusted rent until terminated by the Company.
The Lease grants the Company a right of first refusal in the event BHP intends
to sell the building and property subject to the Lease and includes an agreement
to negotiate in good faith with respect to the Company's possible purchase of
such building and property.
Description of the Processing Technology. The Processing Technology is
capable of producing conventional TiO2 pigment products. TiO2 pigments are
finely-sized powders consisting of TiO2 crystals. These crystals may be either
anatase or rutile phase (shape) and approximate 0.18 to 0.22 microns in size.
The Processing Technology is also capable of producing TiO2 nanoparticles, a
specialty product with a size range of 10 to 100 nanometers (approximately one
tenth the size of conventional pigments). The Company has determined that it
will initially use the demonstration plant to produce TiO2 nanoparticles.
The Processing Technology is fundamentally different from current
processing techniques. The process permits exceptional control over particle
size, shape, and crystalline form. Other processes are based on either a
precipitation of particles from aqueous solution or the formation of
crystallites from molten droplets of titanium oxide generated in high
temperature flame reactors. While nanoparticle products made by these methods
exhibit the surface area and reactivity desired for many applications, they are
often amorphous or multiphase materials that grow in particle size and change
crystalline phase when subjected to high-temperature processing. In contrast,
the Processing Technology produces discrete anatase crystals in nanometer sizes
that are thermally stable at 800 degrees Centigrade for 48 hours or more.
The Processing Technology is based on a proprietary dense-phase crystal
growth technique which controls crystal formation using a combination of
mechanical and fluid dynamics and chemical and thermal control. Through
introduction of very small quantities of selected chemicals ("doping elements")
during crystal growth, the crystal size, phase, catalytic and photocatalytic
activity and size distribution of crystals are controlled within narrow limits
and to specification. Other technologies exclude the introduction of doping
elements during crystal growth.
Processing Assets. The Processing Assets consist principally of a
"semi-works" facility located in the leased premises. The plant was built by BHP
as a research and development facility, but is capable of producing commercial
grade products. The Company intends to commence limited production of TiO2
products using the Processing Technology and Processing Assets during the first
half of 2000. The plant has a nominal annual production capacity of 200 tons of
TiO2 nanoparticles.
Plans for Development of the Titanium Pigment Processing Technology.
The Company intends to initially employ the Processing Technology for the
production and sale of TiO2 nanoparticles. It has hired a production manager to
operate the semi-works plant as a production facility, has commenced product
marketing, and is investigating distributor relationships. The plant has certain
bottlenecks in the process which limit production capacity. The Company intends
to undertake a de-bottlenecking effort during the second half of 2000 which
should significantly increase the production capacity of the plant.
The Company is also analyzing other means of exploiting the Processing
Technology, including licensing arrangements and joint ventures. The Company
believes that, with additional research and development aimed at
7
commercialization, the Processing Technology will be capable of producing
industry standard TiO2 pigments (larger particle size than nanoparticles). The
Company is assessing potential business arrangements which would facilitate the
development of this and other additional applications for the Processing
Technology.
The raw material used as a feedstock in the production of TiO2
nanoparticles, and an intermediate in the production of other TiO2 products, is
titanium tetrachloride, a commodity product manufactured by several suppliers
and readily available on the open market. Although the Company uses purchased
titanium tetrachloride as the feedstock in the production of TiO2 nanoparticles,
the Processing Technology is capable of producing it from an ilmenite raw
material.
Target Market for Products of the Processing Technology. The Company is
initially targeting the markets that utilize the unique optical properties of
TiO2 nanocrystals such as producers of specialty surface coatings and UV
protectant cosmetics. Ultra-fine or nano-sized TiO2 may also be effectively used
in battery components and pollution control and detoxification. Coatings and
cosmetics utilize the ultraviolet shielding capabilities of the material;
pollution control and detoxification processes take advantage of the material's
photocatalytic properties; and battery applications utilize the electrochemical
capabilities of the material. The current global market for TiO2 nanoparticles
is approximately 3,800 metric tons per year, but the Company expects the
nanoparticle market to grow more rapidly than the conventional pigment market as
applications for new technologies generate increased demand.
In addition, the Processing Technology is adaptable to make
nanocrystals of materials suitable for optoelectronics, ceramics and catalysts
as well. Nanomaterials applications being actively pursued by many research
groups include flexible ceramics (cast materials such as automobile engines),
special catalysts (chemical and petroleum processing), health care products
(pharmaceuticals and nano-sized sensors), and optoelectronics. Nano-crystal
optoelectronic components can be used to miniaturize computers, electronic
devices and expand bandwidth in telecommunications.
Research, Testing and Development of the Processing Technology. The
Processing Technology is the result of several years of research and development
work done by BHP. Although the Company believes the technology is presently
commercially viable, it intends to continue the research and development work to
both improve the process and develop additional commercial applications for it.
Such work will be conducted by the BHP employees whose services were acquired in
conjunction with the Processing Technology and Processing Assets. In addition,
the Company may consider joint research and development efforts with customers
and other interested parties.
Processing Technology and Proprietary Rights. The Company believes that
the Processing Technology represents a significant improvement in the recovery
of titanium from titanium-containing ores, and has the potential to materially
reduce processing costs for commodity and specialty products. The two
conventional technologies for processing titanium ores are generally known as
the chloride and sulphate processes. Altair believes that the Processing
Technology is an improvement over these processes in that it offers precise
control of crystal size, structure and chemical composition, it uses a wide
variety of feedstocks, and it recycles wastes.
BHP has filed numerous patent applications with the United States
Patent and Trademark Office ("PTO") with respect to the Processing Technology
and has transferred the rights to such applications to the Company. Such
applications are in the PTO review process, and no patents with respect to the
Processing Technology have been granted to date.
8
Competition--the Titanium Pigment Processing Technology. There are
several producers of TiO2 nanoparticles, the largest of which has approximately
20% of the market. The Company believes that, with a lower cost structure than
its competitors and the ability to produce a more uniform, thermally stable
product in a wide variety of sizes within narrow ranges, it may have a
competitive advantage that will allow its products to quickly gain market
acceptance. However, some producers of TiO2 nanoparticles are major
multinational corporations with far greater financial resources than the
Company. These producers also enjoy other advantages over the Company, including
established customer relationships and operating histories.
The Jig
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Description of the Jig. The Altair Centrifugal Jig segregates particles
based on differences in their specific gravity. Such technology may be
categorized as a "gravity separation" process. Gravity separators are widely
used in minerals beneficiation because of their relative simplicity, low cost of
operation and ability to continuously treat large tonnage throughput. Management
believes the Jig will prove able to economically recover smaller particles than
can presently be economically recovered by competing gravity technologies. While
not yet confirmed through actual operations, the cost to manufacture and operate
the Jig is expected to be similar to the cost to manufacture and operate
competing gravity separators, which can efficiently process only particles
larger than 150 mesh. In contrast, the Company's tests suggest that the Jig will
be able to maintain relative efficiency when processing feeds as small as 400
mesh. See "-- Competition -- The Jig". In tests conducted to date using the Jig
to process relatively small particles, the Jig has yielded product quality
(grade and contaminates) equivalent to that yielded by alternative technologies
processing larger particles. See "--Target Markets For the Jig" and "--
Competition -- The Jig".
Several prototype and demonstration Jigs have been built and tested by
the Company and TMI. Continued field testing of the Jig is being undertaken to
increase the volume capacity, identify any design problems that may reside in
the Jig technology, evaluate the Jig's ability to perform sustained operations,
determine the potential for downtime during such operations and estimate the
anticipated maintenance costs associated with continued operations. In addition,
field testing is being carried out to improve operating design for specific
applications. There can be no assurance that the testing program will be
successful for all applications or that testing will demonstrate the Jig to be
economically attractive to end users. See "--Factors That May Affect Future
Results."
During 1998, the Company conducted preliminary testing of its Series 30
Jig at a mineral recovery plant operated by a large heavy mineral sand producer
located in northern Florida. Results of the testing indicate that the Series 30
Jig is capable of producing separation results comparable in efficiency to those
of the Series 12 Jig for zircon concentrates. (Results of tests using the Series
12 Jig are discussed in "Target Markets for the Jig" below). The Series 30 Jig,
however, is designed to be capable of processing 500 tons of solids per day, or
more than four times the throughput capacity of the Series 12 Jig. The volumes
of solids per day that the Series 30 and Series 12 Jigs are actually capable of
processing have not been established through testing; however, the Company
expects that continued testing will confirm that the two models can process the
volumes they have been designed to process. The Company has also begun design
work for a larger Jig that would have over twice the processing capacity of the
Series 30 Jig. See " -- Research, Testing and Development." Such increased
capacity would enhance the Jig's commercial potential for high volume
applications such as coal washing and recovery of iron ore fines. Also, multiple
units might be used in series or parallel configurations to process high volume
operations.
9
Preliminary demonstration tests conducted by the Company and TMI
suggest that the Jig may be commercially viable in a number of applications,
including:
o Recovery of ultra fine gold from waste streams or former tailings;
o Recovery of zircon, rutile, ilmenite, leucoxene, and other valuable
fractions from heavy mineral sand operations, especially from finely
sized waste piles;
o Sulfur and ash removal from fine coal;
o Recovery of tin and iron ore fines from fine tailings;
o Concentration of heavy minerals, such as anatase, aparite, barite,
cassiterite, chromite, columbite, industrial diamonds, fluorite,
various garnets, monazite, tantalite and wolframite;
o Remediation of nuclear waste.
Target Markets for the Jig. The Company's present focus is on
developing markets for the Jig that have the greatest near-term profit
potential. Although management of the Company believes that, in the long run,
the Jig may potentially be useful for a number of applications, management
believes that the most promising markets for the Jig in the short run are for
use in processing of heavy mineral sands in order to recover heavy minerals,
particularly zircon and titanium.
The Company is seeking to enter into royalty or limited licensing
agreements under which the Jig can add value to the beneficiation process,
especially the processing of heavy mineral sands. Verification testing with the
Series 12 Jig suggests the Jig's potential for recovering zircon from heavy
mineral sand dry mill tails in Florida. In Phase 1 and 2 trials conducted by the
Company involving separation of commercial grade zircon products from mineral
sands, the Series 12 Jig withdrew a larger portion of zircon from the feed ore
than other mineral sands processing equipment in use today. In tests on
zircon/contaminate feeds conducted by the Company, the Series 12 Jig has yielded
greater than 90% zircon concentrates and recovered up to 75% of the zircon fed
to the unit. Initial testing of the Series 30 Jig on zircon/contaminate feeds
produced results which were generally equivalent to the Series 12 Jig. The
Company plans more extensive testing of the Series 30 Jig during 2000. See
"--Plan of Operation."
The primary valuable minerals produced from heavy mineral sands are
titanium and zircon. Titanium is used primarily as a basic component of titanium
dioxide, a pigment used principally as a whitener and opacifier for paper,
plastics, and paint. Zircon is used primarily for foundry molds and in the
manufacture of certain types of glass and ceramics. The Company believes the
domestic and international markets for both of these products are significant
and well established. Both are commodities traded in bulk, usually under
long-term contracts, and are also sold in 50-100 lbs. bags, usually traded as a
spot-priced product. The U.S. Geological Survey has reported that production of
titanium dioxide in the United States during 1999 was approximately 1,350,000
metric tons, representing a market value of approximately $3 billion. The U.S.
Geological Survey does not report zirconium production for the United States;
however, according to survey data for 1999 prepared by the U.S. Geological
Survey, imports of zirconium for consumption in the United States during 1999
were approximately 43,100 metric tons, representing a market value of
approximately $12.9 million. There can be no assurance that testing will
demonstrate that the Jig can economically extract heavy minerals from heavy
minerals sands or that the Jig will prove attractive to end users.
Business Development-the Jig. Testing conducted to date by the Company
indicates the Jig may have economic potential in a wide variety of industries,
and management believes the Jig can be used for finely sized heavy minerals
recovery, coal cleaning and environmental remediation. See "--Target Markets".
During 2000, the Company plans to develop the Jig for use in the processing of
heavy mineral sands and other uses that may have near-term profit potential
through implementation of the following critical steps:
(1) Continued field testing and demonstration of the Series 12 Jig
and experimentation with design manipulations to improve
effectiveness for certain specific applications. In addition,
sustained operational testing is critical in determining if
any material design problems reside in the Jig technology, if
the Jig is capable of sustained operation with little
downtime, and if its maintenance costs are satisfactory. See
"--Research, Testing and Development."
10
(2) Continued field testing, including sustained operational
testing, of the larger volume, more marketable Series 30 Jig.
See "--Research, Testing and Development."
(3) Initial engineering and design work for a Jig that will be
larger than the Series 30 Jig. See "--Research, Testing and
Development."
(4) Separation testing on potential new ore applications such as
tin and iron ore fines.
(5) Development of royalty, rental, or limited licensing
agreements with prospective industrial users and introduction
of the Jigs into targeted markets
Research, Testing and Development of the Jig. Field testing to date
suggests that the Jig possesses the ability to process continuous tonnage
throughput in several applications. The Jig has multiple operating parameters --
primarily rotational speed, pulsing pressure, and screen characteristics --
which must be adjusted to fit the processing requirements of the particular feed
stream being treated. Management believes that more extensive testing is needed
to identify the most efficient operating parameters for specifically identified
applications. Further, demonstration of sustained operation is critical to
marketing efforts. To this end, the Company has installed or is in the process
of installing the Jig in several test sites. Specifically designed research,
testing and development efforts planned for the upcoming twelve months include
the following:
(1) The Company has installed and commenced testing of a Series 30
Jig at a mineral recovery plant located in Northern Florida.
Tests conducted by the Company indicate that the Jig is
capable of yielding greater than 90% zircon concentrates and
recovering up to 75% of the zircon fed to the unit. The Series
30 Jig is designed to process 500 tons per day and is
considered to be commercial-sized for this application. A
Series 12 Jig unit has also been installed at the sand
processing facility in Northern Florida. During 2000, the
Company intends to test various plant titanium and zircon
feedstreams and to test heavy mineral sand feeds from other
Florida locations. Testing utilizing the Jigs is being
performed by Company personnel.
(2) The Company has established a Jig testing facility near Reno,
Nevada to test samples supplied by mineral companies and other
potential users of the Jig. The facility is used for
demonstrations of the Jig technology, provides amenability
testing for a variety of mineral ores, and serves as a test
site for on-going equipment design. The test facility is
equipped with a Series 12 Jig, placed in a "closed loop"
circuit designed to take an initial charge of solids (0.5 to
2.0 tons) which can be continuously fed in slurry form to the
Jig. Concentrate and tails streams produced by the Jig may be
accessed for sampling prior to recombination and return to the
feed circuit. Testing performed at the test facility during
1999 included amenability testing of ores which may have near
term commercial potential for recovery using the Jig.
Operation of the Jig test facility is performed exclusively by
Company personnel.
(3) Engineering and design work will continue on a Jig having
approximately twice the processing capacity of the Series 30
Jig. The Company anticipates that it will be able to complete
construction of the first unit by the end of 2000.
11
Provided that the planned testing of the Jig over the next twelve
months as described above is successful, the Company believes the Series 30 Jig
would be ready at that time for commercial use in applications involving the
recovery of titanium, zircon and gold. While such capabilities of the Jig could
then be marketed, the Company expects that the Jig's multiple operating
parameters would need to be adjusted to fit the requirements of each particular
customer and application. In the event any of the foregoing tests are not
successful, the Company expects that it would conduct additional testing, the
nature of which would depend upon the results obtained in the above-described
tests. During 1999, the Company expended $113,000 for research, testing and
development of the Jig.
Jig Technology and Proprietary Rights. In operation, the Jig utilizes a
combination of standard mechanical jig and centrifugal technologies. Without
having tested the Jig in sustained, commercial operations, management believes
production models of the Jig, if completed, will be capable of sustaining high
reliability and low maintenance costs in a production environment. Use of the
Jig requires no chemical additives. The Series 12 Jig stands about six feet
tall, requires floor space of about 25 square feet and weighs approximately
2,000 pounds, while the Series 30 Jig stands about 10 feet tall, requires floor
space of about 54 square feet and weighs approximately 7,000 pounds. Recently
constructed jigs have been mounted on metal frames along with jig auxiliary
equipment--pulse water pump and tank and control panel--for transport by truck
and rapid on-site installation.
A conventional jig separates a slurry of mineral particles as it flows
across the top of a screen. Water is periodically pulsed up through the screen
to eliminate interparticle friction and allow differential settling according to
the variations in the net specific gravities of the ore. Heavier minerals are
allowed to pass downward through the screen while lighter materials flow across
the screen to a discharge point. The Jig operates according to conventional jig
principles except that the screen surface is cylindrical and is rotated to
subject the particles to centrifugal forces. As currently designed, materials to
be processed by the Jig are introduced into the top of the Jig in a slurry mix
with water. The slurry is diffused across the top of the interior of a vertical
cylindrical screen which is rotating. Water is pulsed through the screen
allowing differential separation in the slurry material. Heavy particles pass
through the screen, are collected, and exit the machine in a "concentrate"
stream. Lighter particles flow down the screen interior, are collected and exit
out the bottom of the machine in a separate "tails" stream.
The Company does not intend to establish its own manufacturing
facility. Management is considering options for manufacture of the Jig,
including manufacturing under contract, exclusive licensing, or a joint venture.
The arrangement could eventually include an exclusive license for manufacture,
warehousing and distribution of spare parts, as well as maintenance and leasing
of the Jig. Currently, the Company has entered into an agreement with a machine
shop located in central Tennessee to manufacture three Series 30 Jigs.
Initial patents related to the concept of the Jig as a whole have been
issued in the United States, South Africa, United Kingdom, Australia and Canada.
These patents expire on various dates between May 1999 and December 2000. A
series of second patents with respect to the process by which water is pulsed
through the cylindrical screen on the Jig, a critical component differentiating
the Jig from competing products, have been issued in the United States, South
Africa, Japan, Europe, Australia, Canada, United Kingdom, Germany and France.
These patents expire on various dates between January 2010 and January 2011. A
third series of patents with respect to an efficiency enhancing component of the
Jig have been issued in the United States, Europe, Australia, Japan, South
Africa, Canada and Brazil. These patents have expiration dates between April and
November 2018.
12
Competition--the Jig.
--------------------
Alternative Technologies. Various mineral processing technologies
perform many functions similar or identical to those for which the Jig is
designed. See "Factors That May Affect Future Results--Competing Products and
Alternative Technologies." Minerals processing technologies are generally
predicated on the physical and chemical characteristics of the materials being
processed. A minerals processor may exploit contrasts in size, specific gravity,
hardness, magnetic susceptibility, electrical conductivity, and similar
characteristics to selectively extract and concentrate mineral constituents.
Minerals processors also exploit variations in chemical reactivity and molecular
affinity to selectively separate minerals.
The Jig competes in an arena in which particle specific gravity is the
primary criteria for particle segregation and capture. Competing technologies in
this arena include the following:
Spirals and Cones. To separate out valuable particles with a spiral or
cone, a mineral processor runs a sand-size feed slurried in water
through a tilted trough (spiral) or over a convex surface (cone). In
this process, fine-sized particles tend to "float" and not settle as
quickly as larger particles. The difference in settling speed permits
the mineral processor to separate out and extract the more valuable
heavy particles. Spirals and cones are most effective in feed sizes
larger than 150 mesh.
Froth Flotation Devices. To separate minerals using a froth floatation
device, a processor introduces chemical agents into a pool of mixed
particles, which agents attach to certain sulfides. Once attached to
the chemical agents, the sulfides float to the surface. The froth
flotation method can be effective on particles 200 mesh or smaller in
size.
Heavy Media Separation. Heavy media separation is a process in which a
feed containing both dense and light particles is fed into a solution
whose specific gravity is midway between the particles to be separated.
The light particles float to the surface of the solution, while the
heavy particles sink. Heavy media separation is effective primarily in
the removal of ash from coal and in small scale analytic laboratory
applications.
The Company believes that, in certain applications, the Jig may prove
more efficient, cost effective, or adaptable than spirals and cones, froth
flotation devices, or heavy media separation devices. Nevertheless, results from
further tests or actual operations may reveal that these alternative
technologies are better adapted to any or all of the uses for which the Jig is
intended. Moreover, regardless of test results, consumers may view any or all of
such alternative technologies as technically superior to, or more cost effective
than, the Jig.
Competing Jig-Like Products. The Company believes that the Jig
currently faces several forms of competition in the commercial segregation of
dense particles contained in feeds between 150 and 400 mesh, including the
Kelsey Jig, Falcon concentrators and the Knelsen batch concentrator unit, which
are currently being used worldwide. Another centrifugal jig device, the Kelsey
jig, has been developed in Australia subsequent to the invention of the Jig. The
Kelsey jig is more complicated in design than the Jig, which the Company
believes makes it more expensive to manufacture, operate and maintain in a
production environment. According to the Kelsey jig's manufacturer, Geo Logics
Pty. Ltd., Kelsey jigs are in service at 24 plants worldwide. In addition,
Falcon, a Canadian company, produces a concentrator which is used mainly for
pre-concentration and scavenging. Their principal applications to date have been
in the gold and tantalum industries. There also exists a batch concentrator
known as the Knelsen Bowl, which management believes is best suited to small
volumes. (A batch concentrator differs from the Jig in that it process a finite
"batch" of material, is completely emptied, and then processes a completely new
finite batch, while the Jig processes a continuous flow of materials). Knelsen
Bowls have been installed in various mining applications, primarily gold,
throughout the world. Both the Falcon and Knelson concentrators utilize
different technologies than the technology employed by the Jig.
13
The Company is a small player in an industry comprised of major mining
companies possessing tremendous capital resources. The Company is an
insignificant competitive factor in the industry. There is no assurance that
competitors, many of whom may have significant capital and resources, will not
develop or are not now in the process of developing competitive equipment that
may be functionally or economically superior to the Company's equipment.
Tennessee Mineral Property
- --------------------------
Description of the Tennessee Mineral Property. The Tennessee Mineral
Property consists of approximately 14,000 acres of land that the Company has
leased (or has binding commitments to lease) in or near Camden, Tennessee,
containing fine, heavy minerals.
[MAP GRAPHIC OMITTED]
From 1996, when the Company began acquiring leases, through 1999,
exploration activities on the Tennessee Mineral Property have included geologic
mapping, sample collection, drilling of 156 auger holes and preparation of
geologic and deposit models. The deposit model also incorporates 40 drill holes
completed by an earlier exploration company. Deposit model estimates are
consistent with deposit estimates previously determined by other resource
companies. The mineralized deposit on the Tennessee Mineral Property has not yet
been proven to be a reserve (as defined in Regulation S-K, Item 802, Guide 7
promulgated under the Exchange Act), and the Company's limited operations and
proposed plan with respect to it are exploratory in nature.
The production of saleable heavy minerals from heavy mineral sand ore
is a two-stage process. At the mine site, heavy mineral ore is treated in a "wet
mill" where a 90% total heavy mineral concentrate is prepared typically
utilizing gravity separation equipment. This concentrate is then taken to a "dry
mill" where individual mineral constituents are extracted using magnetic and
high tension electrical separators.
In order to assess the amenability of the Tennessee Mineral Property
ore to processing with the Jig, two bulk samples were collected by the Company
from the Tennessee Mineral Property. Test work completed by the Company on the
first sample during the spring of 1997 suggested the sands can be processed with
the Jig. Tests performed by the Company which emphasized recovery have yielded
up to 94% heavy mineral recovery with a six-to-one concentration ratio. (Stated
differently, after a single pass through the Jig, 94% of the ore's value was
concentrated in about one-sixth of its original volume, and five-sixths of the
sand rendered a non-valuable discard.) As is typical of gravity separation
processing, several passes through the Jig will be necessary to produce a 90%
total heavy mineral concentrate. Further, in the event the Tennessee Mineral
Property is proven to contain significant heavy mineral reserves the Jig would
likely be used in conjunction with traditional gravity separators, primarily
spirals, to most efficiently process the sand ore in the "wet mill".
14
A second bulk sample was collected during late 1997. Approximately
5,000 pounds of representative mineralized material was collected from an
exposed sand horizon. This sample was processed by an independent Florida heavy
sands producer and the Company utilizing both "wet mill" and "dry mill"
processes to produce representative samples of saleable products. The sample
results were reviewed by an independent consulting group hired by the Company to
prepare a pre-feasibility study of the Tennessee Mineral Property. See "--Plan
of Operation." In July 1998, the independent consulting group completed their
technical pre-feasibility study of approximately 4,700 acres of the Tennessee
Mineral Property known as the "Camden Deposit." The study states that the Camden
Deposit contains an indicated resource of 12 million tons of total heavy
minerals consisting of 65% titanium-bearing minerals, 15% zircon and 20%
non-valuable heavy minerals. It indicated that saleable ilmenite, rutile and
zircon products can be produced, and that established markets currently exist
for such products. The study then modeled mining and production costs and
concluded that the Camden Deposit has the potential to be economically mined via
a large-scale sand mining operation with an approximate 20-year life.
Based on the positive results of the consultant's report, the Company
initiated a final feasibility study in August 1998. The Company has commenced
the design and engineering of the wet concentration process/facilities and has
filed an application for a National Pollution Discharge Elimination System
permit for a pilot plant facility with the Tennessee Department of Environment
and Conservation. Other activities involved in the feasibility study will
include additional drilling to further define resource characteristics, detailed
analysis of mineralogical characteristics and mine processing methods, larger
scale testing of the Series 30 Jig, analysis of product markets, and evaluation
of possible strategic alliances. The Company expects that the final feasibility
study will be completed during the second half of 2000. If the feasibility study
suggests that cost-effective mining of the Tennessee Mineral Property is
feasible, mining could begin within 24-36 months after completion of the study,
subject to, among other things, the price of, and demand for extractable heavy
minerals and the Company's ability to obtain necessary financing, permits, and
government approvals. See "--Plan of Operation" and "--Government Regulation and
Environmental Concerns."
Subsequent to the completion of the pre-feasibility study, further
exploration of the Tennessee Mineral Property by the Company suggested the
existence of an additional heavy mineral sands resource of approximately 10
million tons in an area northwest of the Camden Deposit known as the "Little
Benton Deposit." Preliminary results indicate that the Little Benton Deposit
contains a high-grade titanium mineralization similar to the Camden Deposit. The
Company has approximately 7,900 acres under lease in the Little Benton area and
intends to conduct further testing of the Little Benton Deposit. If such testing
affirms the existence of the indicated resource, and the feasibility study
suggests that cost-effective mining of the Tennessee Mineral Property is
feasible, the production capacity and/or life of the mining operation could be
significantly increased.
Research, Testing and Development of the Tennessee Mineral Property. As
discussed in "--Description of the Tennessee Mineral Property" above, in July
1998, an independent consulting group completed a technical pre-feasibility
study of approximately 4,700 acres of the Tennessee Mineral Property known as
the "Camden Deposit." Based on the positive results of the consultant's report,
the Company initiated a final feasibility study in August 1998 which it
anticipates will involve additional drilling to further define resource
characteristics, detailed analysis of mineralogical characteristics and mine
processing methods, larger scale testing of the Series 30 Jig, analysis of
product markets, and evaluation of possible strategic alliances. The Company
expects that a feasibility study will be completed during the second half of
2000. If the feasibility study suggests that cost-effective mining of the
Tennessee Mineral Property is feasible, mining could begin within 24-36 months
after completion of the study, subject to, among other things, the price of, and
demand for extractable heavy minerals and the Company's ability to obtain
necessary financing, permits, and government approvals.
15
During 1999, the Company incurred $689,594 in deferred exploration
expenditures on the Tennessee Mineral Property. Expenditures were incurred on
leasehold minimum advance royalty payments, auger hole drilling, sampling,
sample analysis and assay, geological and mineralized deposit characterization
studies and other related exploration activities.
Competition--the Tennessee Mineral Property. Based on the exploratory
work done to date, the Company anticipates that the saleable products which may
be produced from the Tennessee Mineral Property are ilmenite, rutile and zircon.
Ilmenite, which may contain 40% to 70% titanium dioxide, is used in the
production of titanium dioxide pigment, a specialty chemical used principally as
a whitener and opacifier for paper, plastics and paint. According to the U.S.
Geological Survey, ilmenite is the most abundant naturally occurring,
commercially produced titanium mineral and supplies approximately 90% of the
world demand for titaniferous material. Such demand is projected to increase at
an annual rate of 2%-3% for the foreseeable future. The United States imports
approximately 60% of total ilmenite consumed. There are presently three entities
in the United States which produce ilmenite concentrate from heavy mineral sands
and virtually all production is used by five titanium pigment producers whose
plants are primarily located in the southeastern U.S. Pigment producers use
various methods to process ilmenite concentrate into titanium dioxide pigment
and require that the concentrate feedstock meet certain chemical and size
criteria applicable to the process being used. The Company believes that, if it
can economically mine the Tennessee Mineral Property and produce satisfactory
products for sale to pigment producers, it may have a competitive advantage in
being a domestic producer operating in close proximity to its primary markets.
Rutile, which generally contains greater than 95% titanium dioxide, is
also used in the production of titanium dioxide pigment. Its processing costs
are significantly less than ilmenite due to the higher concentration of titanium
dioxide. Although this greatly enhances its market value, rutile is much less
abundant than ilmenite, representing approximately 5% of the total heavy
minerals contained in the Tennessee Mineral Property.
Zircon, which is used in ceramic, refractory and foundry applications,
represents approximately 15% of the heavy minerals contained in the Tennessee
Mineral Property. Zircon sand is currently being produced at three mines in the
southeastern U.S. and in several countries around the world. Titanium-bearing
minerals and zircon are commonly found and mined together.
Plan of Operation--General.
- ---------------------------
With respect to the Jig, the Company's marketing efforts in the near
future will continue to be directed to opportunities within North America, with
future expansion into foreign markets developing over time. Because the Company
does not intend to engage in the actual manufacture of the Jig, it does not
expect to purchase a manufacturing facility or any significant manufacturing
equipment.
During 2000, the Company expects to hire sales, marketing and
production employees for its titanium pigment processing business. The quantity
and timing of new hires will be dependent on business activity. As part of the
acquisition of the Processing Technology from BHP, the Company received the use,
until December 31, 2000, of the services of the eighteen BHP employees
developing the Processing Technology. The Company expects to hire these
individuals as Altair employees on January 1, 2001.
Management does not otherwise anticipate that the number of Company
employees will significantly increase until the Company has sufficient sales and
business activity to warrant it. Management expects to hire two to four
additional employees during the next 12-month period; however, the actual number
of new employees hired will depend on the Company's operating results. If hired,
such new employees would be primarily engineering and technical staff to support
testing, development and commercialization programs.
16
Subsidiaries.
- -------------
Altair International Inc.1 was incorporated under the laws of the
province of Ontario, Canada in April 1973. Altair currently has three
wholly-owned subsidiaries, Fine Gold Recovery Systems, Inc., a Nevada
corporation ("Fine Gold"), Mineral Recovery Systems, Inc., a Nevada corporation
("MRS"), and 660250 Ontario Limited, an Ontario Corporation, and three indirect
wholly-owned subsidiaries, California Recovery Systems, Inc., a Nevada
corporation, Altair Technologies, Inc., a Nevada corporation, and Tennessee
Valley Titanium, Inc., a Nevada corporation.
Fine Gold was acquired by the Company in April 1994. Fine Gold is, for
accounting purposes, a development stage company with no operating revenues
earned to date. The Company's acquisition of TMI in February 1996 was effected
by merging TMI with and into Fine Gold (the "TMI Merger"). Fine Gold also now
includes the operations of a wholly-owned subsidiary of the Company formerly
known as Mineral Recovery Systems, Inc., which was merged with and into Fine
Gold in June 1996. As discussed below, another wholly-owned subsidiary of the
Company, formerly known as Carlin Gold Company, is now operated under the name
Mineral Recovery Systems, Inc. The Company intends that Fine Gold will hold and
maintain Jig technology rights, including patents, and will enter into a royalty
arrangements to allow MRS to develop and commercially utilize the Jig.
MRS was incorporated by the Company in April, 19872. MRS previously has
been involved in the exploration for minerals and development of unpatented
mining claims in Nevada, Oregon and California. All mining claims have now been
abandoned. The Company currently intends that MRS will arrange for the
manufacture of the Jig for commercial sales, rental or royalty arrangements with
end users. In addition, MRS currently holds, directly or indirectly, all of the
Company's interest in the Tennessee Mineral Property, and the Company intends
that MRS will continue to lease or acquire and develop mineral properties in the
future, particularly properties that contain mineral resources that may be
processed with the Jig.
Altair Technologies, Inc. holds all of the Company's interest in the
titanium pigment processing technology. California Recovery Systems, Inc. held
the company's exploratory rights with respect to the California Mineral
Property, which were terminated during 1999. The remaining 100% owned
subsidiaries do not presently have any assets or operations.
- ------------------------
(1) The Company was incorporated in April 1973 under the name Diversified
Mines Limited, which was subsequently changed to Tex-U.S. Oil & Gas Inc. in
February 1981, then to Orex Resourcese Ltd. in November 1986, then to Carlin
Gold Company Inc. in July 1988, to Altair International Gold Inc. in March 1994,
and to Altair International Inc. in November 1996.
(2) MRS was formerly known as Carlin Gold Company. The name change was
effective in June 1996.
17
Government Regulation and Environmental Concerns.
- -------------------------------------------------
Government Regulation. The Company's exploration of the Tennessee
Mineral Property, testing of the Jig, and operation of the titanium pigment
processing facility are, and any future testing, operation, construction or
mining activities of the Company will be, subject to a number of federal, state,
and local laws and regulations concerning mine and machine safety and
environmental protection. Such laws include, without limitation, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the
Comprehensive Environmental Response Compensation Liability Act. Such laws
require that the Company take steps to, among other things, maintain air and
water quality standards, protect threatened, endangered and other species of
wildlife and vegetation, preserve certain cultural resources, and reclaim
exploration, mining and processing sites. These laws are continually changing
and, as a general matter, are becoming more restrictive.
Compliance with federal, state, or local laws or regulations represents
a small part of the Company's present budget; nevertheless, continued compliance
may be extremely costly, especially if the Company actually commences extraction
operations on the Tennessee Mineral Property. If the Company fails to comply
with any such laws or regulations, a government entity may levy a fine on the
Company or require the Company to take costly measures to ensure compliance. Any
such fine or expenditure may adversely affect the Company's development.
The Company is committed to complying with and, to its knowledge, is in
compliance with all governmental regulations. The Company cannot, however,
predict the extent to which future legislation and regulation could cause the
Company to incur additional operating expenses, capital expenditures, and/or
restrictions and delays in the development of the Company's products and
properties.
Environmental Regulation and Liability. Any proposed mining or
processing operation on the Tennessee Mineral Property, at the facility at which
the Processing Assets are located or any other property acquired by the Company
will be subject to federal, state, and local environmental laws. Under such
laws, the Company may be jointly and severally liable with prior property owners
for the treatment, cleanup, remediation, and/or removal of substances discovered
on the Tennessee Mineral Property or any other property used by the Company,
which are deemed by the federal and/or state government to be toxic or hazardous
("Hazardous Substances"). Courts or government agencies may impose liability
for, among other things, the improper release, discharge, storage, use,
disposal, or transportation of Hazardous Substances. The Company might use
Hazardous Substances and, although the Company intends to employ all reasonably
practicable safeguards to prevent any liability under applicable laws relating
to Hazardous Substances, companies engaged in mineral exploration and processing
are inherently subject to substantial risk that environmental remediation will
be required.
Employees.
- ----------
The business of the Company is currently managed by Dr. William P.
Long, President and Chief Executive Officer of the Company and Mr. C. Patrick
Costin, Vice President of the Company and President of MRS and Fine Gold. In
addition, the Company employs a Chief Financial Officer, a senior process
engineer, a metallurgist, a geologist, a controller and a part-time employee in
an office management and administrative assistance capacity. There are no other
employees of the Company or its subsidiaries.
Other than the employment agreements of Dr. Long and Mr. Costin
described below, and the employment agreement with the Chief Financial Officer,
there are no written employment agreements between the Company or its
subsidiaries and their respective personnel. The future success of the Company
18
will depend, in part, on its ability to attract and retain highly qualified
technical, marketing and management personnel. There is no assurance the Company
will be successful in retaining or attracting highly qualified individuals in
key positions. See "Factors That May Affect Future Results - We are Dependent on
Key Personnel."
Where You Can Find More Information.
- ------------------------------------
The Company files annual, quarterly, and current reports, proxy statements,
and other information with the SEC. You may read and copy any reports,
statements, or other information that the Company files at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.
The SEC also maintains an Internet site (http://www.sec.gov) that makes
available to the public reports, proxy statements, and other information
regarding issuers, such as the Company, that file electronically with the SEC.
The Common Stock is quoted on the Nasdaq National Market. Reports, proxy
statements and other information concerning the Company can be inspected and
copied at the Public Reference Room of the National Association of Securities
Dealers, 1735 K Street, N.W., Washington, D.C. 20006.
Glossary of Terms.
- ------------------
Amenability means responsiveness of an ore deposit to processing.
Ash means inorganic residue remaining after coal combustion. Ash is an
undesirable component of coal because it reduces thermal value and produces a
waste product after combustion.
Assay means to analyze an ore or other substance to determine the
presence, absence, and quantity of one or more components.
Beneficiate means to improve the grade of ore by processing.
Centrifugal force means the component of force on a body in curvilinear
motion that is directed away from the axis of rotation.
Coal fines means finely pulverized coal particles which will pass
through a 28 mesh screen.
Coal washing means processing of pulverized coal to remove ash and
pyrite.
Environmental remediation means removal of harmful mineral particles
from a site previously altered by human activities.
Heavy minerals sands means beach or dune sands which contain a small
fraction of heavy particles. Heavy mineral sands are commercially mined to
produce titanium minerals and zircon.
Ilmenite means a titanium-bearing oxide mineral containing variable
percentages of iron and used as a raw material in the production of titanium
pigments.
Mesh means one of the openings or spaces in a screen. The value (size)
of the mesh is given as the number of openings per linear inch.
19
Mill means a building with machinery for processing ore. Dry mill
refers to heavy minerals sand processing of dry materials. Wet mill refers to
heavy minerals sand process of material that are mixed with water in slurry.
Mineralized Deposit or Mineral Deposit means a mineralized body which
has been delineated by appropriately spaced drilling and/or underground sampling
to support a sufficient tonnage and average grade of metals. Such a deposit does
not qualify as a reserve until a comprehensive evaluation based upon unit cost,
grade, recoveries and other material factors conclude legal and economic
feasibility.
Placer means deposits of sand, gravel and other detrital or residual
material containing a valuable mineral which has accumulated through weathering
and natural mechanical concentration processes. A placer mine is an operation
that recovers certain valuable minerals based on differences in specific
gravity.
Pyrite means a yellowish-brown mineral sulfide containing iron and
sulphur. Pyrite is an undesirable component of coal because sulphur dioxide gas
is released when it is burned with coal.
Specific gravity means the ratio of the mass of a solid or liquid to
the mass of an equal volume of water at a specified temperature.
Tails or tailings means those portions of washed ore that are regarded
as too poor to be treated further, as distinguished from material (concentrates)
that is to be smelted or otherwise utilized.
Thermal value means a measure of the ability of a fuel (coal) to
produce energy when ignited.
20
Forward-looking Statements.
- ---------------------------
This Form 10-K contains various forward-looking statements. Such
statements can be identified by the use of the forward-looking words
"anticipate," "estimate," "project," "likely," "believe," "intend," "expect," or
similar words. These statements discuss future expectations, contain projections
regarding future developments, operations, or financial conditions, or state
other forward-looking information. When considering such forward-looking
statements, you should keep in mind the risk factors noted in this section and
other cautionary statements throughout this Form 10-K and the Company's other
filings with the Commission. You should also keep in mind that all
forward-looking statements are based on management's existing beliefs about
present and future events outside of management's control and on assumptions
that may prove to be incorrect. If one or more risks identified in this Form
10-K or any other applicable filings materializes, or any other underlying
assumptions prove incorrect, the Company's actual results may vary materially
from those anticipated, estimated, projected, or intended.
Among the key factors that may have a direct bearing on the Company's
operating results are risks and uncertainties described under "Factors That May
Affect Future Results," including those attributable to the absence of operating
revenues or profits, uncertainties regarding the development and
commercialization of the Jig, development risks associated with the Tennessee
Mineral Property, risks related to the Company's purchase and proposed
development and exploitation of the Processing Technology and Processing Assets
and uncertainties regarding the Company's ability to obtain capital sufficient
to continue its operations and pursue its proposed business strategy.
Factors that May Affect Future Results.
- ---------------------------------------
- --------------------------------------------------------------------------------
RISK FACTORS RELATED TO THE COMPANY GENERALLY
- --------------------------------------------------------------------------------
We Have Not Generated Any Operating Revenues or Profits.
- --------------------------------------------------------
Altair is a development stage company. To date, Altair has not
generated revenues from operations or realized a profit. Altair is presently
investing substantial resources in the testing and development of the Jig, the
exploration of the Tennessee Mineral Property, and the acquisition, development
and commercialization of the Processing Technology and Processing Assets. There
can be no assurance that the Jig, the Tennessee Mineral Property, the Processing
Technology and Processing Assets or any other project undertaken by Altair will
ever enable Altair to generate revenues or that Altair will at any time realize
a profit from operations.
21
We May Continue to Operate at a Net Loss.
- -----------------------------------------
Altair has experienced a loss from operations in every fiscal year
since its inception. Altair's losses from operations in 1998 were $1,762,088 and
its losses from operations in 1999 were $2,291,850. Although Altair expects to
begin product sales of TiO2 nanoparticles in 2000, total sales will probably not
be at a level sufficient to produce a positive net income for the year. Altair
will continue to experience a net operating loss until, and if, the Processing
Technology and Processing Assets, the Jig and/or the Tennessee Mineral Property
begin generating revenues for Altair. Even if the Processing Technology and
Processing Assets, the Jig or the Tennessee Mineral Property begin generating
revenues, such revenues may not exceed the costs of production. Accordingly,
Altair may not ever realize a profit from operations.
We May Not be Able to Raise Sufficient Capital to Meet Present and Future
- --------------------------------------------------------------------------------
Obligations.
- ------------
Altair may not be able to obtain the capital necessary to complete the
development work necessary to place the Processing Technology and Processing
Assets into continuous operation in a commercial setting. In addition, we may be
unable to obtain the capital necessary to complete testing and development of
the Jig or exploration of the Tennessee Mineral Property. If Altair determines
to construct and operate a mine on the Tennessee Mineral Property, Altair will
need to obtain a significant amount of additional capital to complete
construction of the mine and commencement of operations.
In addition, Altair may need additional capital for necessary or
discretionary acquisitions of equipment, properties, intellectual property
rights or companies. General and industry market factors or other unforeseen
events may also affect Altair's use of and need for capital.
If Altair needs additional capital, it may not to be able obtain the
amount of additional capital needed or may be forced to pay an extremely high
price for capital. Factors affecting the availability and price of capital may
include, without limitation, the following:
o market factors affecting the availability and cost of capital generally;
o the performance of Altair;
o the size of Altair's capital needs;
o the market's perception of mining, technology, and or minerals stocks;
o the economics of projects being pursued; and
o industry perception of Altair's ability to recover minerals with the Jig
or Processing Technology.
If Altair is unable to obtain sufficient capital or is forced to pay a high
price for capital, Altair may be unable to place the Processing Technology and
Processing Assets into continuous operation, complete the testing and production
of the Jig, exploration and development of the Tennessee Mineral Property, or
otherwise pursue and fully exploit existing or future development opportunities.
In addition, because of their size, resources, history and other factors,
certain competitors of Altair may have better access to capital than Altair and,
as a result, may be able to exploit opportunities more easily or thoroughly than
Altair.
22
Our Operations Are And Will Be Subject to Extensive Government Regulation.
- --------------------------------------------------------------------------
Altair's exploration of the Tennessee Mineral Property, testing of the
Jig, and operation of the titanium pigment processing facility are, and any
future testing, operation, construction or mining activities of Altair will be,
subject to a number of federal, state, and local laws and regulations concerning
mine and machine safety and environmental protection. Such laws include, without
limitation, the Clean Air Act, the Clean Water Act, the Resource Conservation
and Recovery Act, and the Comprehensive Environmental Response Compensation
Liability Act. Such laws require that Altair take steps to, among other things,
maintain air and water quality standards, protect threatened, endangered and
other species of wildlife and vegetation, preserve certain cultural resources,
and reclaim exploration, mining and processing sites. These laws are continually
changing and, as a general matter, are becoming more restrictive.
Compliance with federal, state, or local laws or regulations represents
a small part of Altair's present budget; nevertheless, continued compliance may
be extremely costly, especially if Altair actually commences mining operations
on the Tennessee Mineral Property. If Altair fails to comply with any such laws
or regulations, a government entity may levy a fine on Altair or require Altair
to take costly measures to ensure compliance. Any such fine or expenditure may
adversely affect Altair's development.
Certain of Our Experts and Directors Reside in Canada And May Be Able to Avoid
- --------------------------------------------------------------------------------
Civil Liability.
- ----------------
Altair is an Ontario corporation, and a majority of its directors are
residents of Canada. In addition, certain of Altair's experts (including its
principal accountants and Canadian legal counsel) are located in Canada. As a
result, investors may be unable to effect service of process upon such persons
within the United States and may be unable to enforce court judgments against
such persons predicated upon civil liability provisions of the United States
securities laws. It is uncertain whether Canadian courts would (i) enforce
judgments of United States courts obtained against Altair or such directors,
officers or experts predicated upon the civil liability provisions of United
States securities laws or (ii) impose liability in original actions against
Altair or its directors, officers, or experts predicated upon United States
securities laws.
We are Dependent on Key Personnel.
- ----------------------------------
The continued success of Altair will depend to a significant extent on
the services of Dr. William P. Long, President and Chief Executive Officer of
Altair, and Mr. C. Patrick Costin, Vice President of Altair and President of
Fine Gold and MRS. The loss or unavailability of Mr. Long or Mr. Costin could
have a material adverse effect on Altair. Altair does not carry key man
insurance on the lives of such key officers.
In addition to the individuals identified above, Altair employs a Chief
Financial Officer, senior process engineer, metallurgist, geologist, controller,
and administrative assistant. Altair has no other employees. Aside from Dr.
Long, Mr. Costin and the Chief Financial Officer, Altair has no employment
agreements with any of its personnel. Competition for such personnel is intense,
and Altair can provide no assurance that it will be able to attract and maintain
all personnel necessary for the development and operation of its business.
23
We May Fail to Identify or Be Unable to Consummate Important Strategic
- --------------------------------------------------------------------------------
Transactions.
- -------------
Altair is currently evaluating, and plans to continue to evaluate,
licensing or acquiring additional mining products or properties. Altair also
plans to remain open to acquiring, or developing strategic relations with other
companies that have products, manufacturing capabilities, or other qualities
that are compatible with Altair's business objectives. Altair must compete for
attractive acquisition or strategic alliance candidates with numerous other
companies, many of whom have significantly greater financial and technological
resources than Altair. In addition, to the extent Altair is in a competitive
position, it may fail to identify or consummate acquisition or strategic
alliance opportunities.
Even if Altair identifies and completes such alliances, consummation
thereof may require Altair to incur additional debt, amortize expenses related
to goodwill and intangible assets, or issue dilutive equity securities, all of
which could adversely affect Altair's operating results or financial condition.
In addition, a failure by Altair to integrate its operations with that of an
ally or acquisition target may adversely affect operating results. Disruptions
in operations are likely to be especially severe during the fiscal quarters
immediately following any acquisition or alliance transaction, while the
operations of the acquired or combined business are being integrated into
Altair's operations.
We May Issue Substantial Amounts of Additional Shares Without Stockholder
- --------------------------------------------------------------------------------
Approval.
- ---------
Altair's Articles of Incorporation authorize the issuance of an
unlimited number of shares of Common Stock. All such shares may be issued
without any action or approval by Altair's stockholders. In addition, Altair has
two stock option plans which have potential for diluting of the ownership
interests of Altair's stockholders. The issuance of any additional shares of
Common Stock would further dilute the percentage ownership of Altair held by
existing stockholders.
The Market Price of Our Common Stock Is Extremely Volatile.
- -----------------------------------------------------------
The Common Stock was listed on the Alberta Stock Exchange through April
23, 1998 and has been listed on the Nasdaq National Market since January 26,
1998. Between March 24, 1997 and January 23, 1998, our Common Stock was listed
on the Nasdaq SmallCap Market. Trading in the Common Stock has been
characterized by a high degree of volatility. See "Price Range of Common Stock."
Trading in the Common Stock may continue to be characterized by extreme
volatility for numerous reasons, including the following:
o Uncertainty regarding the viability of the Processing Technology;
o The continued absence of any revenues from the Jig;
o Uncertainty regarding the viability of mining the Tennessee Mineral
Property;
o Continued dominance of trading in the Common Stock by a small number of
firms;
o Positive or negative announcements by Altair or its competitors;
o Industry trends, general economic conditions in the United States or
elsewhere, or the general markets for equity securities, minerals, and
commodities;
24
o The announcement of financial or research and development results that
differ from analyst and investor expectations, regardless of the health
of Altair;
o Significant changes in future prospects of Altair; and
o Speculation by short sellers of Common Stock or other persons who stand
to profit from a rapid increase or decrease in the price of the Common
Stock.
Future Sales of Currently Restricted Securities May Affect the Market Price of
- --------------------------------------------------------------------------------
Our Common Stock.
- -----------------
The resale of "restricted securities" as well as securities held by
"affiliates" of Altair, is generally subject to the provisions of Rule 144
("Rule 144") promulgated under the Securities Act of 1993, as amended (the
"Securities Act"). In general, under Rule 144 as currently in effect, a person
who has beneficially owned restricted securities for at least one year
(including the holding period of any prior owner except an affiliate) would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1% of the number of shares of Common Stock then
outstanding or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the filing of a Form 144 with respect to such
sale. In addition, a person who is not deemed to have been an affiliate of
Altair at any time during the 90 days preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years (including the
holding period of any prior owners except an affiliate), would be entitled to
sell such shares under Rule 144(k) without regard to the requirements described
above. Altair is unable to predict the effect that future sales under Rule 144
may have on the then prevailing market price of the Common Stock.
In addition, shares issued upon exercise of options granted pursuant to
Altair's employee stock option plans are presently registered under the
Securities Act. Subject to certain restrictions on resale by affiliates, such
shares may be sold without restriction. The sale of any substantial number of
shares of Common Stock may have a depressive effect on the market price of our
Common Stock.
We Have Never Declared A Dividend And May Not For the Foreseeable Future.
- ------------------------------------------------------------------------
Altair has never declared or paid dividends on the Common Stock.
Moreover, Altair currently intends to retain any future earnings for use in its
business and, therefore, does not anticipate paying dividends on its Common
Stock in the foreseeable future.
- --------------------------------------------------------------------------------
RISK FACTORS RELATED TO DEVELOPMENT OF THE JIG
- --------------------------------------------------------------------------------
Our Series 12 Jig Is Too Small For Most Commercial Uses.
- --------------------------------------------------------
To date, Altair has developed and tested a lower-capacity Series 12 Jig
and a higher-capacity Series 30 Jig. Test results on the Series 12 Jig, designed
to be capable of processing approximately 120 tons of solids per day, suggest
that commercial use of the Series 12 Jig is technically feasible. Nevertheless,
the designed capacity of the Series 12 Jig is too small for coal washing, heavy
25
minerals extraction, and most other intended applications of the Jig, except use
in small placer gold mines or similar operations. Even if the Series 12 Jig
performs to design specifications in subsequent tests or at a commercial
facility, Altair believes that, because of its small capacity, the potential
market for the Series 12 Jig is limited.
Testing Is Incomplete on Our Series 30 Jig.
- -------------------------------------------
The Series 30 Jig is designed to process approximately 500 tons of
solids per day. Altair believes that this designed capacity is sufficient for
heavy mineral sands processing and many other intended commercial applications.
Having completed an initial set of tests on the Series 30 Jig at a heavy
minerals sand processing facility in Northern Florida, Altair hopes that it can
begin marketing the Series 30 Jig for heavy mineral sands recovery during 2000.
Nevertheless, the Series 30 Jig may not prove attractive to potential end users.
Even if Altair is successful in leasing the Series 30 Jig to end users, the
Series 30 Jig may not prove efficient, durable, or cost-effective enough to
satisfy the expectations of end users once operated in an uncontrolled
environment. In addition, the introduction of new technologies by competitors
could render the Series 30 Jig or larger Jig obsolete or unmarketable or require
costly alterations to make it marketable.
Performance Of The Jig In A Commercial Setting May Not Match Test Results.
- --------------------------------------------------------------------------
Although test results from controlled tests on the Series 30 Jig
suggest that it is capable of separating valuable heavy minerals from mineral
sands, the Series 30 Jig has not been operated as part of an actual commercial
mineral processing facility. When integrated into actual commercial operations,
the Series 30 Jig:
o may not be able to process sand at its design capacity;
o may not recover a commercially valuable end product at a commercial
viable rate when processing mineral sands;
o may break down frequently or otherwise be too costly to operate and
maintain;
o may be displaced or rendered obsolete by the introduction of competing
technologies or jigs and may be incompatible with developing mining or
extraction processes; and
o may be rendered obsolete by the absence of demand for heavy minerals or
other end product of processing.
26
The Jig Faces Competition From Alternative Technologies.
- --------------------------------------------------------
The centrifugal jig process may not prove superior, either technically
or commercially, to alternative technologies. As explained in "Business--the
Jig--Competition--Alternative Technologies," various mineral processing
technologies perform many functions similar or identical to those for which the
Jig is designed. Altair believes that, in certain applications, the Jig may
prove more efficient, cost effective, or adaptable than spirals and cones, froth
flotation devices, or heavy media separation devices. Nevertheless, results from
further tests or actual operations may reveal that these alternative
technologies are better adapted to any or all of the uses for which the Jig is
intended. Moreover, regardless of test results, consumers may view any or all of
such alternative technologies as technically superior to, or more cost effective
than, the Jig.
The Jig Faces Competition From Other Jig-like Products.
- -------------------------------------------------------
Altair believes that the Jig currently faces several forms of
competition in the commercial segregation of dense particles contained in feeds
between 150 and 400 mesh, including the Kelsey Jig, Falcon concentrators and the
Knelsen batch concentrator unit, which are currently being used worldwide.
Another centrifugal jig device, the Kelsey jig, has been developed in Australia
subsequent to the invention of the Jig. According to the Kelsey jig's
manufacturer, Geo Logics Pty. Ltd., Kelsey jigs are in service worldwide. In
addition, Falcon, a Canadian company, produces a small batch concentrator as
well as a machine which is used mainly for pre-concentration and scavenging.
Their principal applications to date have been in the gold and tantalum
industries. There also exists a batch concentrator known as the Knelsen Bowl.
Knelsen units have been installed in various mining applications, primarily
gold, throughout the world. Competitors, many of whom may have significant
capital and resources, may develop, or be in the process of developing, superior
or less expensive alternatives to the Jig.
The Market for Commodities Produced Using the Jig May Collapse.
- ---------------------------------------------------------------
If the Jig is successfully developed and manufactured, Altair intends
to use the Jig, or lease the Jig for use, to separate and recover valuable,
heavy mineral particles. Active international markets exist for gold, titanium,
zircon, and many other minerals potentially recoverable with the Jig. Prices of
such minerals fluctuate widely and are beyond the control of Altair. A
significant decline in the price of minerals capable of being extracted by the
Jig could have significant negative effect on the value of the Jig. Similarly, a
significant decline in the price of minerals being produced or expected to be
produced on the Tennessee Mineral Property could have a significant negative
effect on the viability of a mine or processing facility on either such
property. In addition, because Altair intends to market the Jig primarily to
mining companies, a general economic downturn in the mining or mineral
industries may have a material adverse effect on Altair.
27
We Are Dependent Upon Others To Manufacture The Jig.
- ----------------------------------------------------
Altair currently contracts on a per-unit basis with a machine shop
located in central Tennessee for assembly of the Jig but has no long-term
contract with such entity. If Altair completes testing of the Jig and develops a
final production model, Altair does not currently have the know-how or resources
to establish its own manufacturing facility. Management is considering options
for manufacture of the Jig, including manufacturing under a long-term contract
or through an exclusive licensing arrangement or joint venture. Altair may not
be able to obtain adequate manufacturing capacity. Moreover, even if a
manufacturer is found, it may not be able to cost-effectively produce
affordable, high-quality units capable of sustaining continuous operations with
low maintenance costs in a production environment.
Certain Key Patents For The Centrifugal Jig Have Expired Or Will Expire In The
- --------------------------------------------------------------------------------
Near Future.
- ------------
Initial patents on the Jig have been issued in the United States, South
Africa, United Kingdom, Australia and Canada. These patents expire on various
dates between May 1999 and December 2000. A series of second patents have been
issued with respect to a critical component of the Jig in the United States,
South Africa, Japan, Europe, Australia, Canada, United Kingdom, Germany and
France. These patents expire on various dates between January 2010 and January
2011. A third series of patents with respect to an efficiency enhancing
component of the Jig have been issued in the United States, Europe, Australia,
Japan, South Africa, Canada and Brazil. These patents have expiration dates
between April and November 2018.
Persons in countries in which Altair has not patented the Jig or
certain critical components may develop and market an infringing product. The
cost of enforcing patents outside of North America, and similar obstacles, may
limit Altair's ability to enforce its patents and keep infringing products out
of the market for the Jig.
- --------------------------------------------------------------------------------
RISK FACTORS RELATED TO DEVELOPMENT OF THE
TENNESSEE MINERAL PROPERTY
- --------------------------------------------------------------------------------
We Have Not Completed Testing The Feasibility of Mining The Tennessee Mineral
- --------------------------------------------------------------------------------
Property.
- ---------
The Tennessee Mineral Property is currently in the exploratory stage.
An independent consultant hired by Altair has completed a pre-feasibility study
on the Tennessee Mineral Property, which study concludes sands on the Tennessee
Mineral Property contain commercial quantities of heavy minerals. The
preliminary study further concludes that the sands can be economically mined to
produce commercial grade products and that established markets exist for such
products. Based on these results, Altair has determined to commence a final
feasibility study of the Tennessee Mineral Property.
The final feasibility study, commenced during August 1998, will involve
the actual design, pricing, and analysis of equipment and facilities that would
be used to mine the Tennessee Mineral Property. Altair expects that the
feasibility study will be completed in late 2000. If the feasibility study
suggests that cost-effective mining of the Tennessee Mineral Property is
feasible, a mine would not be operational for 24-36 months after completion of
the study. The final feasibility study may indicate that the Tennessee Mineral
28
Property does not contain minable quantities of heavy minerals or that such
deposits are not amenable to large-scale, low-cost mining, as contemplated by
Altair. Even if the studies and future testing suggest that mining is
economically feasible on the Tennessee Mineral Property, Altair may be unable to
obtain the capital, resources, and permits necessary to mine the Tennessee
Mineral Property. Moreover, market factors, such as a decline in the price of,
or demand for, minerals recoverable at the Tennessee Mineral Property, may
adversely affect the development of mining operations on such property.
We May Be Unable to Obtain Necessary Environmental Permits for the Tennessee
- --------------------------------------------------------------------------------
Mineral Property.
- -----------------
In order to begin construction and commercial mining on the Tennessee
Mineral Property, Altair may have to obtain additional federal, state, and local
permits, none of which Altair has obtained. Because Altair has not yet commenced
design of a commercial mining facility in the Tennessee Mineral Property, Altair
is not in a position to definitively ascertain which federal, state and local
mining and environmental laws or regulations would apply to a mine on the
Tennessee Mineral Property. Nevertheless, Altair anticipates that compliance
with the Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act, and the Comprehensive Environmental Response Compensation
Liability Act would be necessary if Altair determined to commence construction
and operation of a mine on the Tennessee Mineral Property. See "--Government
Regulation."
In addition to these federal laws and regulations, Altair anticipates
that, if the Tennessee Mineral Property is developed, Altair will be required to
obtain a surface mining permit from the State of Tennessee under the Tennessee
Mineral Surface Mining Law of 1972. The application for such a permit must be
preceded by public notice and must include, among other things, a filing fee, a
reclamation and revegetation plan, and a bond to cover the costs of reclamation.
Moreover, in connection with its feasibility study of the Tennessee Mineral
Property, Altair has filed an application for a National Pollution Discharge
Elimination System permit for a pilot plant facility with the Tennessee
Department of Environment and Conservation. The application is currently under
review. Additional state and federal permits may be required for the
construction and operation of the pilot plant Altair can provide no assurance
that it will be able to obtain any such permit.
Altair is not aware of any existing local land use restrictions that
would outright prohibit mining operations on the Tennessee Mineral Property.
Altair has held preliminary discussions with state and federal officials
regarding land use issues and permitting requirements, but no decisions have
been issued by any regulatory agencies.
29
Any Operations On the Tennessee Mineral Property May Lead to Environmental
- --------------------------------------------------------------------------------
Liability.
- ----------
Any proposed mining or processing operation on the Tennessee Mineral
Property, or any other property acquired by Altair, will be subject to federal,
state, and local environmental laws. Under such laws, Altair may be jointly and
severally liable with prior property owners for the treatment, cleanup,
remediation, and/or removal of substances discovered on either of the Tennessee
Mineral Property or any other property used by Altair, which are deemed by the
federal and/or state government to be toxic or hazardous ("Hazardous
Substances"). Courts or government agencies may impose liability for, among
other things, the improper release, discharge, storage, use, disposal, or
transportation of Hazardous Substances. Altair might use Hazardous Substances
and, although Altair intends to employ all reasonably practicable safeguards to
prevent any liability under applicable laws relating to Hazardous Substances,
Companies engaged in mineral exploration and processing are inherently subject
to substantial risk that environmental remediation will be required.
- --------------------------------------------------------------------------------
RISK FACTORS RELATED TO DEVELOPMENT OF THE
PROCESSING TECHNOLOGY AND PROCESSING
- --------------------------------------------------------------------------------
We Have Not Yet Confirmed the Viability and Effectiveness of the Processing
- --------------------------------------------------------------------------------
Technology and Processing Assets.
- ---------------------------------
The Processing Technology and Processing Assets have not been used by
Altair or anyone else in a commercial setting, and may prove ineffective or
unreliable when subjected to continuous use. Altair has used the Processing
Technology and Processing Assets to effectively produce sample quantities of
TiO2 nanoparticles, but has not completed testing of other product applications.
The Processing Technology and Processing Assets may prove wholly or partially
ineffective when applied by Altair on a continuous basis in a commercial
setting. In addition, the Processing Assets may break down, be costly to
maintain or prove unreliable when operated on a continuous basis in a commercial
setting. If the Processing Technology proves ineffective or the Processing
Assets prove unreliable in a commercial setting, Altair may be unable to recoup
the investment in the Processing Technology and Processing Assets.
Nanoparticles Produced Using the Processing Technology May Be, or Be Perceived
- --------------------------------------------------------------------------------
As, Substandard.
- ----------------
In the short run, Altair plans to use the Processing Technology and
Processing Assets to produce TiO2 nanoparticles. Altair has not previously
produced or marketed TiO2 nanoparticles and, to date, has not obtained any
orders for TiO2 nanoparticles. The TiO2 nanoparticles and other products
produced using the Processing Technology and Processing Assets may be of
inferior quality to alternative products or, regardless of actual quality, may
be perceived as lacking adequate quality or reliability. Even if Altair is able
to efficiently produce TiO2 nanoparticles and other products using the
Processing Technology and Processing Assets, it may not be able to sell such
products in the marketplace.
30
The Current Market For TiO2 Nanoparticles Is Limited.
- -----------------------------------------------------
In the short run, Altair plans to use the Processing Technology and
Processing Assets to produce TiO2 nanoparticles. The uses for such nanoparticles
are limited--primarily cosmetics and surface coatings--and the market for such
nanoparticles is small, estimated at 3,800 tons per annum. Even if Altair is
able to effectively produce TiO2 nanoparticles and other products using the
Processing Technology and Processing Assets, it may not be able to profitably
market such products for any of the following reasons:
o there may be insufficient demand for such products;
o despite strong initial demand for such products, the market for such
products may contract or collapse as a result of a decrease in demand
for goods incorporating such mineral products, a worldwide or regional
financial crisis, or other unforeseen event;
o the increased supply of such products as a result of the entrance of
Altair or other suppliers into the market may cause the price to drop,
reducing or eliminating profitability;
o such products may be of inferior quality to alternative products or,
regardless of actual quality, may be perceived as lacking adequate
quality or reliability.
Our Cost of Production May Exceed Estimates.
- -------------------------------------------
Altair purchased the Processing Technology and Processing Assets based
on the belief that it will be able to produce titanium dioxide and other
products more cheaply than many competitors. Altair has not, however, produced
any mineral products using the Processing Technology and Processing Assets on a
commercial basis. Altair's actual costs of production may exceed those of
competitors and, even if its costs of production are lower, competitors may be
able to sell titanium dioxide and other products at a lower price than is
economical for Altair.
Pending Patent Applications May Be Denied Or Provide Inadequate Protection.
- ---------------------------------------------------------------------------
BHP has filed numerous patent applications with the PTO with respect to
the Processing Technology and has transferred the rights to such applications to
Altair. Such applications are being reviewed by the PTO, and no patents with
respect to the Processing Technology have been granted to date. If the
applications for any patents related to the Processing Technology are denied,
the value of the Processing Technology, and any competitive advantage gained
from Altair's ownership of the Processing Technology, will be substantially
diminished. Altair can provide no assurance that pending patent applications
will be granted.
In addition, persons in jurisdictions outside of the United States in
which no application has been filed, or which do not honor United States
patents, may develop and market infringing technologies. Also, the cost of
enforcing patents outside of North America, as well as other obstacles, may
limit the Altair's ability to enforce any patents related to the Processing
Technology outside of the United States.
31
Use of the Processing Technology May Lead to Substantial Environmental
- --------------------------------------------------------------------------------
Liability.
- ----------
Any proposed use of the Processing Technology and Processing Assets
will be subject to federal, state, and local environmental laws. Under such
laws, Altair may be jointly and severally liable with prior property owners for
the treatment, cleanup, remediation, and/or removal of substances discovered at
the leased Reno, Nevada facility or any other property used by Altair that are
Hazardous Substances. Courts or government agencies may impose liability for,
among other things, the improper release, discharge, storage, use, disposal, or
transportation of Hazardous Substances. Altair might use Hazardous Substances
and, although it intends to employ all reasonably practicable safeguards to
prevent any liability under applicable laws relating to Hazardous Substances,
companies engaged in mineral exploration and processing are inherently subject
to substantial risk that environmental remediation will be required.
Item 2. Properties
Altair maintains a registered office at 56 Temperance Street, Toronto,
Ontario M5H 3V5. Altair does not lease any space for, or conduct any operations
out of, the Toronto, Ontario registered office. In addition, Altair leases 900
square feet of office space at 1725 Sheridan Avenue, Suite 140, Cody, Wyoming
82414, which serves as the corporate headquarters for Altair and its
subsidiaries. Altair's lease for the Cody, Wyoming office space may be
terminated by either party on 30 days' prior written notice.
In addition, in connection with the Asset Purchase Agreement, Altair
and BHP entered into a lease dated November 15, 1999, pursuant to which Altair
is leasing approximately 20,000 square feet of laboratory and testing space at
BHP's testing facility located at 204 Edison Way, Reno, Nevada, 89502. The
initial term of the lease expires on December 31, 2000, subject to automatic
renewal for six-month periods at inflation-adjusted rent until terminated by
Altair. The lease grants Altair a right of first refusal in the event BHP
intends to sell the building and property subject to the lease and includes an
agreement to negotiate in good faith with respect to Altair's possible purchase
of such buildi